The EUR/USD currency pair shifted the corrective pullback to about 1.0215 from the initial 1.0202. This follows the decision of traders to become cautious as the consumer price index of the US is about to be published. Another factor that puts pressure on the pair is the economic concerns that surround the Eurozone.
USD Index Recovery favored by Equities
The US Dollar index recovered in the late hours of Tuesday after a strong US report teamed up with the reduced equities. The relatively positive American Treasury yield also added its quota. Russia’s decision to further tighten its oil flow to Europe escalated recession fears in Europe, giving the US Dollar more positivity.
EUR/USD price chart. Source TradingView
The US Non-farm production rose by -4.6% on Tuesday in the course of the second quarter. This came against the expected figure of -4.7% and the last record of -7.4%. And the unit cost of labor jumped by 10.8% from the initial figure of 2.7% and the market expectation of 9.5%.
In addition to all these, the President of the St. Louis Fed, James Bullard, said that he wants interest rates to be at 4% at the end of the year. This has joined other suggestions for stronger interest rates. There is now a 70% possibility of favoring a 75 basis point Federal Reserve interest rate increase.
Russia Takes Tough Measures
In Europe, Russia has put a hold on oil flow through the southern part of the Druzhba as a result of payment issues. The American ten-year Treasury bond yield recovered its upside gains as it closed the day at about 2.78%. Wall Street’s benchmarks equally posted some losses when the day ended.
Chinese consumer price and producer price indexes for the month of July are expected to give the market some direction. It will come before the German harmonized index for the final consumer price reading.
But more attention will be turned to the US consumer price index as it is expected to drop to 8.7% from its last figure of 9.1% year-on-year. The consumer price index minus energy and food might also rise to 61% from 5.9%. The US Dollar might also see more increase in the event of a stronger inflation figure as a result of the hawkish sentiments.
In spite of the recent slide, the EUR/USD pair continues to be above the 21-period daily moving average. It is also above the support line running for two weeks.